After a lengthy antitrust investigation, the DOJ apparently failed to find evidence to support a case against major U.S. air carriers for colluding to reduce capacity and raise prices, lifting a cloud that had been hanging over the domestic airline industry.

The DOJ opened its investigation in 2015 into what a DOJ spokesperson at the time called “possible unlawful coordination” among major airlines. The DOJ reportedly launched the investigation in response to public statements by industry executives celebrating the “discipline” each had exhibited in not adding flights with the improvement in the economy. “Discipline,” to the DOJ, likely meant deliberate efforts by airlines to avoid expanding capacity to meet increases in demand as the economy improved. If supply of flights did not increase more quickly than demand, airlines could limit downward pressure on airfares and on their profit margins.

Because unilateral actions by airlines or statements by their executives do not violate the antitrust laws, the DOJ likely looked in its investigation for evidence of coordination among industry executives – including circumstantial evidence from which they could ask a court to infer the existence of an unlawful agreement among the airlines. In 1992, the DOJ found evidence of such an agreement among airlines through their use of the Airline Tariff Publishing Company’s systems to exchange detailed information about upcoming fares. But the DOJ apparently found no similar support for an agreement to maintain capacity discipline and, according to reports, is unlikely to continue to pursue its investigation, particularly in the new Administration.

Reports that the DOJ demanded in its investigation copies of communications between the airlines and their large investors also suggests another potential angle to the DOJ’s investigation that also failed to pan out. Economists have recently explored the potential effect on industrywide prices of the ownership by large institutional investors of shares in competing companies – with the airline industry as one subject of their research. In a recent op-ed in the New York Times, three economists raised this economics work as an issue for consideration by the Trump Administration. The DOJ did not confirm specifically that it was looking into how institutional owners of shares in airlines might have contributed to potential competitive harm, but the former head of the DOJ’s Antitrust Division stated in a 2016 oversight hearing on Capitol Hill that the DOJ was aware of the research and that “it is an issue we are looking at . . . in more than one industry.”

As with the concerns about capacity coordination that the DOJ ultimately found to be unsupported, the ownership by institutional investors of stakes in competing airlines would violate the Sherman Act only if the airlines reached an illegal agreement – in this case one orchestrated by the investors. A so-called “hub-and-spoke” arrangement, under which an investor held one-on-one discussions with airlines (and even encouraged them not to compete aggressively with other airlines), would not raise antitrust concerns without evidence of the “rim” on the wheel in the form of an agreement among the airlines. The DOJ evidently looked for evidence of that rim in communications between the airlines and their investors and found it lacking.

Although the cloud of the DOJ investigation has been dropped, U.S. airlines continue to face a number of private antitrust class actions that were consolidated in federal district court in the District of Columbia. In October 2016, the district court denied the defendant airlines’ motion to dismiss, finding that the facts alleged by the plaintiffs concerning efforts by the airlines to maintain “capacity discipline” (which the court was required to accept as true at this stage in the case) created a plausible basis on which the court might later infer an agreement among the airlines. Importantly, the court did not consider at this stage any evidence offered by the defendants that the airlines did not agree to limit their capacity or raise airfares. Discovery in the case is ongoing, and is expected to be completed by April 2018.